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Quantified at Last: Investments in Digital Technologies Drive Profits, Productivity

MD Staff

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Digital technologies such as robotics, mobile and social media, the internet of things, artificial intelligence and big data analytics are transforming the global economy. Overall, investments in these technologies are leading to an increase in productivity and EBITDA for a majority of companies. However, several factors influence the return on investment. A new report, Maximizing the Return on Digital Investments, published today by the World Economic Forum in collaboration with Accenture, looks at the impact of investments in digital technologies across 14 different industries.

The data shows that gains are not evenly distributed. The growth associated with these investments is currently driven by the top 20% of companies (by productivity) within each industry sector. Without broader implementation, an “industry inequality” could emerge, creating a small group of highly productive industry leaders and leaving the rest of the economy behind. SMEs in particular, often the driver of national economies, could suffer from competitive disadvantages.

The findings are based on a survey of over 16,000 businesses between 2015 and 2016 and mark a first attempt at quantifying the business impact of digital technologies. Among the key results are that investment in a combination of cognitive technologies, the internet of things, robotics and mobile/social media led on average to an increase in productivity three times higher than investments in any of these technologies individually.

The report, which aims to help business leaders make informed investments in technology, finds considerable variation between industries when it comes to digital investments. On average, heavier industries realize greater returns in productivity. Chemistry and Advanced Materials registered the greatest returns, with industry leaders achieving 160% additional EBITDA per employee investing in these technologies and 120% for the remainder of the sector. Gains by Professional Services businesses follow, generating 80% and 40% respectively. The heavier industries claim the highest gains from investment in robotics (90%), while mobile and social media provide a 70% return for service-oriented companies.

Of the technologies analysed, cognitive technologies offered the highest return, generating $1.90 per employee for every dollar invested. It is expected that the largest investment in these technologies between 2016 and 2020 will be in the internet of things as IoT build-out will generate the huge amounts of data needed for artificial intelligence and big data analytics to flourish.

“Digital transformation is a key driver of sweeping change in the world around us, improving people’s lives and opening new opportunities for businesses to grow and create value,” said Jonas Prising, Chairman and Chief Executive Officer of ManpowerGroup. “Yet gaps occur when innovation moves faster than organizational and societal frameworks allow. Wherever companies are on their digital journey, the path is clear: they need to invest in the technologies that maximize business opportunity on the one hand while developing people’s skills and capabilities to be successful in the digital age with the other.”

Would-be technology investors should be aware, however, that while industry leaders on the whole generate higher returns than followers, the survey finds that when it comes to internet of things and cognitive technologies, followers are able to benefit from the best practices and reduced costs made possible by pioneering leaders, and thus achieve a greater return.

“At the moment, companies are running the risk of investing in digital technologies without a full picture of the impact of those decisions. This is either because they find the benefits hard to quantify, they are worried about disrupting their own business model or they just don’t know how to make the right investments,” said Bruce Weinelt, Head of Digital Transformation of the World Economic Forum. “This report provides proof of positive returns on digital investments and offers executives practical guidelines.”

The report identifies five key drivers for maximizing value from digital investments:

Agile and digital-savvy leadership: nimble decision-making process combined with strategic vision across all management levels

Forward-looking skills agenda: Reskilling and aligning hiring around innovation to create a flexible, accountable workforce

Ecosystem thinking: success is increasingly dependent on customers, partners, and supply chain and other stakeholders

Data access and management: real-time insights are only possible with robust data infrastructure, warehousing and analytics

Technology infrastructure readiness: Effective use of cloud storage, cyber security, interoperability and transparency is key

The report was developed with input from Arne Sorenson, President and Chief Executive Officer, Marriott International, and Jonas Prising, Chairman and Chief Executive Officer, ManpowerGroup. It is part of the Forum’s Digital Transformation Initiative launched in 2015. Over the past three years, the initiative has analysed the impact of digital transformation across multiple industries with inputs from more than 450 experts, including over 200 chief executives.

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Science and society: Mind the gap

MD Staff

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International regulations are failing to keep up with the mind-boggling pace of new scientific discoveries and potential “cowboy” applications.

As we go about our daily lives we never quite know what is around the corner. Is there anything we are doing—a technology we are using–which could one day cause us harm or threaten our existence?

When scientists discovered the ozone layer was being depleted, policymakers eventually heeded the dire warnings of damage to the environment and human health, and a global agreement was reached to take remedial action.

Science is double-edged in that it can bring enormous benefits to humans, but at the same time it can create things we did not intend, with harmful consequences.

Today, scientists are using new tools like 3D printing, artificial intelligence and increasingly powerful computers, microscopes and satellites to better understand our world. They are discovering possible solutions to challenges we know about and are uncovering emerging challenges.

While innovative science holds out the possibility of solving many of the climate change and ecosystems challenges we face, we must be careful not to unleash a Frankenstein. Thus, it is important that society at large understands the global implications of new discoveries and governments agree on regulations in line with the precautionary principle.

Under this principle, stringent risk assessment and the inclusion of diverse stakeholder perspectives should be applied in the development and handling of innovative applications and products. The precautionary principle states that when human activities may lead to unacceptable harm that is scientifically plausible but uncertain, action should be taken to avoid or diminish that harm.

Part of UN Environment’s work is horizon-scanning for the latest discoveries with potentially global implications. To this end, it works with scientists and organizations across the world to highlight the most important emerging challenges for decision-makers in government, business and civil society and provide them with the knowledge and options to act quickly.

At the micro-level, there have been some amazing discoveries recently. Take seed preservation, which is vital given that the world is losing plant species at an unprecedented rate, with about one in five thought to be at risk of extinction.

The Global Strategy for Plant Conservation requires that 75 per cent of threatened plant species be conserved ex situ by 2020. But seed banking (where seeds are dried and stored in a vault at minus 20°C) is not an option for many threatened plants such as oak, chestnut and avocado trees. These trees have desiccation-sensitive seeds which are killed if dried. According to models published in the journal Nature Plants, 36 per cent of critically endangered plant species, 33 per cent of all trees and about 10 per cent of medicinal plants fall into this category.

So alternative techniques are needed. Researchers are investigating cryopreservation for these hard-to-store seeds, which include staples such as coffee and cocoa. Cryopreservation involves removing the plant embryo from the rest of the seed, then freezing it at very low temperatures in liquid nitrogen.

Meanwhile in the United States, scientists have demonstrated how they can generate small quantities of electricity from a mushroom covered in bacteria.

Researchers at Stevens Institute of Technology in the United States used 3D printing to attach clusters of energy-producing bugs to the cap of a button mushroom. They made the mushroom “bionic” by supercharging it with 3D-printed clusters of cyanobacteria (a group of photosynthetic bacteria) that generate electricity, and swirls of graphene nanoribbons that can collect the current. The mushroom, a fungus, provides an environment in which the cyanobacteria can last several days longer than on a silicone and dead mushroom as suitable controls. Such discoveries herald the possibility of harnessing bacteria in new ways for clean energy generation in the future.

Synthetic biology

One challenge identified by UN Environment and partners is the advanced genetic-engineering technology known as synthetic biology. Did you know that scientists can modify microorganisms like E. coli by rewriting their genetic code to turn them into tiny living factories that produce biofuel? Or that Baker’s yeast can also be reprogrammed to derive an antimalarial drug called artemisinin, which is normally sourced from the sweet wormwood plant?

Synthetic biology is defined by the Convention on Biological Diversity as a further development and new dimension of modern biotechnology that combines science, technology and engineering to facilitate and accelerate the understanding, design, redesign, manufacture and/or modification of genetic materials, living organisms and biological systems.

However, the intentional or accidental release of genetically engineered organisms into the environment could have significant negative impacts on both human and environmental health.

Synthetic biology has been identified as an emerging issue with potentially global implications. As such, it will feature alongside governance of geo-engineering, permafrost peatlands, maladaptation (actions that may lead to increased risk of adverse climate-related outcomes), the circular economy of nitrogen, and landscape connectivity in UN Environment’s flagship Frontiers Report due to be released in March 2019.

UN Environment

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New year, new smart home innovations for your interconnected life

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Smart home products made major strides in 2018. More people than ever now use connected devices in their homes, and smart home hubs are constantly adding new integrations and capabilities. Research from Statista predicts that by the end of 2018, more than 45 million smart home devices will be installed in U.S. homes, fueling an exciting new phase for the smart home industry, offering consumers new and improved smart technologies and giving rise to a totally interconnected, easy-to-control environment termed the “smart home.”

This innovation looks to continue in the new year with increasingly intuitive products that make life more enjoyable and interconnected. Here are the new smart home products ready to change the way we live in the new year, coming out of the 2019 Consumer Electronics Show (CES).

Laundry made easy

The calendar might have changed, but your laundry needs haven’t gone anywhere. Thankfully, smart home technology is making the chore a little easier with LG’s Ultimate Laundry Room.

The LG Styler is a first-of-its-kind steam clothing care system certified as asthma and allergy friendly(R) by the Asthma and Allergy Foundation of America (AAFA). The Wi-Fi enabled smart LG Styler reduces wrinkles and odor and refreshes garments with the fastest cycle on the market today — as little as 20 minutes — thanks to the gentle power of pure steam technology. Furthermore, LG TWINWash(TM) with SideKick(TM) pedestal washer, an industry-first innovation for laundry, allows users to tackle small loads that are a big deal and can’t wait or wash two loads at the same time.

With LG Styler for daily refreshes, the innovative LG SideKick(TM) mini washer for small loads that can’t wait, and LG’s award-winning top and front load washers and dryers, the LG Ultimate Laundry Room suite of products can be started, stopped or monitored from anywhere using LG’s SmartThinQ(R) app. Users will receive notifications when a cycle has finished, or they can download new cycles, check energy usage and quickly troubleshoot minor issues using Smart Diagnosis. For added convenience, these home solutions can also be controlled with simple voice commands using the Google Assistant.

Smarter home with smart displays

Laundry is just one example of how smart home technology is making life easier. By adding other connected appliances and devices, you can develop a true smart home ecosystem in which seamless integrations produce valuable efficiency. One of the best ways to anchor your ecosystem is with a smart display like the new LG XBOOM AI ThinQ WK9 Smart Display. The advanced smart display builds on the capabilities of a Google Assistant speaker with the added convenience of a touchscreen display and, in partnership with Meridian Audio, delivers high-fidelity sound, precise vocal definition and accurate bass, despite its compact size.

In addition to its audio and video capabilities, the WK9 enables control of other LG ThinQ products such as LG TVs and home appliances, plus more than 10,000 smart devices from over 1,000 brands that work with Google Assistant. By establishing a go-to hub for all your smart home devices, you can increase connectivity and create a fully integrated smart home environment.

Stay connected on-the-go

As innovation continues, smart home technology is branching outside of the home itself. With new products, you can receive notifications regarding your home from anywhere, making sure you never lose touch with the most important things in your life. The first full-screen smartwatch with mechanical hands, the LG Watch W7 allows you to connect and control your smart devices. With two mechanical hands and a micro gearbox, users can enjoy the full WearOS smartwatch experience with the essence and mechanism of a true timepiece. With mobile connectivity, your life becomes easier no matter where you are.

Smart home technology is all about making our lives easier and more comfortable. Whether you’re just doing laundry, looking to power your whole home, or even taking that control on the road, new smart home products provide a level of convenience that’s changing the way we live.

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From Steel to Smartphones, Meet the World Economic Forum’s New Factories of the Future

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BMW Group, Regensburg Plant, Germany

The World Economic Forum today announces the addition of seven new factories to its network of “Manufacturing Lighthouses”, state-of-the-art facilities that serve as world leaders in how to successfully adopt and integrate the cutting-edge technologies of the Fourth Industrial Revolution.

The Lighthouses join a group of nine others, which were unveiled in 2018. All were selected from an initial list of 1,000 manufacturers based on their successful implementation of Fourth Industrial Revolution technologies in ways that have driven financial and operational impact.

The wider purpose of the community is to help overcome the practical challenges being experienced by industries in advanced and emerging economies when upgrading technology. Earlier work by the Forum identified that more than 70% of businesses investing in technologies, such as big data analytics, artificial intelligence (AI) or 3D printing, fail to move beyond the pilot phase. In response to this, all Lighthouses in the network have agreed to open their doors and share their knowledge with other manufacturing businesses.

The new Lighthouses represent a range of industries and geographical locations, with four factories located in Europe, two in China and one in the Middle East. Importantly, the list also contains a medium-sized business, the Italian-based Rold. One frequent challenge highlighted by businesses is that they lack the scale and resources to implement advanced technologies cost effectively.

The new Lighthouses are:

BMW Group (Regensburg Plant, Germany): This car plant manufactured approximately 320,000 vehicles in 2018. By using the custom BMW internet of things platform, it incurred time and cost, but the result has been cut the time to deploy all new applications by 80% leading to, among other things, a significant reduction in logistics costs and 5% reduction in quality issues.

Danfoss, Commercial Compressors (Tianjin, China): This factory makes compressors for refrigerators, air conditioning units and other products. By using its full digital traceability system and digital tools such as smart sensors, visual inspection, auto monitoring system etc. to improve quality control, it has improved labour productivity by 30% and decreased customer complaints by 57% within two years.

Foxconn (Shenzhen, China): “Lights off factory” – This factory, which specializes in components for smartphones and other electrical equipment, boasts a fully automated manufacturing process with machine learning and AI driving auto optimization of equipment, smart self-maintenance and real-time status monitoring in smart production. Its Fourth Industrial Revolution-first approach has resulted in efficiency gains of 30% and lowered its stock cycle by 15%.

Rold (Cerro Maggiore, Italy): This 240-employee business makes locking mechanisms for washing machines and dishwashers. As the only SME in the Lighthouse network, its use of Fourth Industrial Revolution technologies such as smart watches, rapid prototyping and digital dashboards has helped improve turnover by between 7% and 8%.

Sandvik Coromant (Gimo, Sweden): This producer of cutting tools and solutions has created a digital thread through its production processes that has significantly raised labour productivity. One example is its ‘touchless changeover’ which allows design patterns to be changed automatically, even during unmanned shifts.

Saudi Aramco Uthmaniyah Gas Plant (Uthmaniyah, Saudi Arabia): The giant’s gas processing plant has become a leader in a number of Fourth Industrial Revolution technologies including the use of Advanced Analytics and Artificial Intelligence solutions via Saudi Aramco Fourth Industrial Revolution Center, the use of drones to inspect pipelines and machinery (cutting inspection times by 90%) and wearable technologies such as digital helmets that help workers cut the time it takes to make inspections and repairs.

Tata Steel (IJmuiden, The Netherlands): This plant of 9,000 employees is putting its people first, creating an Advanced Analytics Academy to help workers come up with solutions to reduce waste, and improve the quality and reliability of production processes. This work has resulted in a significant improvement in financial results.

The Lighthouse programme has been conducted in collaboration with McKinsey. In conjunction with the expansion of the network, the Forum today also publishes a white paper, Fourth Industrial Revolution: Beacons of Technology and Innovation in Manufacturing, which showcases findings from the project to date.

“Lighthouse factories are found in companies large and small, in all industries and regions. Rather than replacing operators with machines, lighthouse factories are transforming work to make it less repetitive, more interesting, diversified and productive. Rather than staying within the factory walls, Lighthouses build a broad innovation system with business, government and civil society. Beyond local pilots, Lighthouses create value and resilience through the supply chain, and agility and responsiveness for customers. Technology, deployed wisely in our manufacturing and production system, can create a better, cleaner world. We hope this network can be a source of inspiration to help break out of productivity stagnation and deliver the maximum positive benefit for society,” said Helena Leurent, Head of the Shaping the Future of Production System Initiative at the World Economic Forum.

“These 16 Lighthouses represent a turning point. We are now seeing the start of the second phase, as Fourth Industrial Revolution technologies are penetrating the core of all industries, and our platform of 16 Lighthouses is the clearest sign we have,” said Enno de Boer, Partner and Head of McKinsey’s Global Manufacturing Practice, which collaborated with the Forum on the project. “However, these leaders have a two-year head start ahead of companies that are still sorting out how to scale. We are running the risk that the value creation will be centered around a few ecosystems, rather than disseminated across entire industries. The race has clearly started.”

The extended network of “Manufacturing Lighthouses” will be officially presented at the World Economic Forum’s Annual Meeting 2019, taking place on 22-25 January 2019 in Davos-Klosters, Switzerland, and convening under the theme, Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution.

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